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Instant noodles maker Tingyi mulls over strategic acquisitions in instant food

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December 4
9:42 AM 2013

PepsiCo Inc.'s Chinese partner, Tingyi (Cayman Islands) Holding Corp, was reportedly mulling over potential acquisitions in the instant food business segment in order to revive its sales. Bloomberg said the company's annual sales showed signs of slowing down in eight years.

Chief Financial Officer Frank Lin revealed in an interview on November 29 in Taipei that the maker of Master Kong brand ready-to-drink teas and snacks was looking into acquiring companies and could form a strategic alliance in 2014. Lin also said that the company is considering to work with domestic and international brands for cooperation and acquisition deals.

Lin explained, "For the instant food business, we choose M&A instead of organic growth because it's faster to expand our presence in the China market." He also said that the company has not made a final decision regarding any of its alliance and acquisition plans, but the company will be focusing on China in the next five years.

Tingyi had already made strategic alliances with other companies including PepsiCo and Asahi Group Holdings Ltd in the last three years as it taps the rising consumption in the mainland due to a boost in customer income. Bloomberg said in its report that the Tianjin-based company could easily leverage its USD1.6 trillion cash on hand to make acquisitions in the hopes of staving off competition from foreigners like Nestle SA.

Moreover, half of Tingyi's revenues are reportedly derived from its beverages, 43% from its instant noodles segment and 2.5% from instant food that include egg rolls, muffins and sandwich snacks. Also, Bloomberg added that this year, Tingyi's supply of infant formula for China is derived from the Wakodo baby nutrition unit of Asahi Group.

In a note to investors today, Sanford C. Bernstein & Co. analysts led by Jean Chan wrote that Tingyi does not have a good track record with mergers and acquisitions integration despite noting that it was the right strategy to expand its business in instant food. Mizuho Securities Asia Ltd analyst Jeremy Yeo suggested that Tingyi could pursue deals in profitable segments like health foods, cookies, nuts, chocolate-based snacks and dairy products.

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